Understanding the 2025 Amendments to the UKs Energy Company Obligation

The UK government is on a mission to tackle energy efficiency and reduce heating costs for households. Enter the Electricity and Gas (Energy Company Obligation) (Amendment) Order 2025, a legislative update designed to bolster the efforts of energy suppliers in meeting their obligations under two key schemes: ECO4 and the Great British Insulation Scheme (GBIS).

What’s Changing?

1. Expanded Compliance Options:

   • The new legislation provides more flexibility for energy suppliers. They can now use savings achieved under the ECO4 scheme to help meet their GBIS targets, addressing shortfalls and ensuring more homes benefit from energy efficiency upgrades.

2. Refined Definitions and Administrative Tweaks:

   • Definitions of "rural area" have been updated to match the latest data from the Office for National Statistics, which helps in better targeting properties that qualify for rural area incentives.
   • Installers must be registered with TrustMark, and any measures flagged as non-compliant by TrustMark will be rejected.

3. Smart Meter Pledges:

   • Before any energy efficiency measures are installed, consumers will be encouraged to opt-in for smart meter installations. This non-binding pledge aims to increase smart meter uptake, leveraging the retrofit process to boost consumer engagement.

4. Target Reassignment Flexibility:

   • Suppliers can now reassess annual bill savings (ABS) achieved under ECO4 towards their GBIS obligations. This pragmatic approach helps suppliers meet targets without excessively increasing consumer bills.

5. Encouraging Energy Efficiency:

   • The government aims to raise the energy efficiency of fuel-poor homes to a minimum rating of Band C by 2030. Reassigning ABS from ECO4 to GBIS supports this goal by maximizing efficiency benefits within existing cost structures.

6. Updates to Building Standards:

   • The legislation aligns with the latest Publicly Accessible Standards (PAS) for building installations, ensuring that all measures meet contemporary quality expectations.

7. Combination of Low-Cost Measures:

   • Households can now benefit from a combination of low-cost insulation measures, making the schemes more attractive to suppliers and beneficial for homeowners.

Why These Changes?

The updated Order aims to streamline efficiency improvements, making it easier and cheaper for suppliers to meet their obligations. By allowing flexibility in meeting GBIS targets through ECO4 achievements, the government hopes to maintain momentum in improving home energy efficiency without placing undue financial burdens on consumers or suppliers.

Consultation and Feedback:

The amendments stem from a comprehensive consultation process involving energy suppliers, industry stakeholders, and devolved administrations in Scotland and Wales. Feedback led to several key decisions, such as capping the proportion of GBIS targets met through ECO4 reassigned measures at 75% and expanding the permissible combinations of low-cost measures.

Impact and Future Monitoring:

This legislative update primarily affects energy suppliers by easing compliance and potentially reducing costs. It is designed with an eye on efficiency, aiming to reach more households with energy-saving measures and contribute to national targets on fuel poverty and energy efficiency.

The Department for Energy Security and Net Zero will closely monitor the implementation, requiring regular progress reports to ensure suppliers are on track to meet their targets by the scheme's conclusion in 2026.

In summary, the 2025 amendments to the Energy Company Obligation are a strategic step towards a greener, more energy-efficient Britain, with a clear focus on flexibility, efficiency, and stakeholder engagement.